Question
Walnut Systems produces two different products, Product A, which sells for $132 per unit, and Product B, which sells for $191 per unit, using
Walnut Systems produces two different products, Product A, which sells for $132 per unit, and Product B, which sells for $191 per unit, using three different activities: Design, which uses Engineering Hours as an activity driver; Machining, which uses machine hours as an activity driver; and Inspection, which uses number of batches as an activity driver. The cost of each activity and usage of the activity drivers are as follows: Design (Engineering Hours) Machining (Machine Hours) Inspection (Batches) Usage by Cost $155,136 $534,060 $ 27,755 Product A 201 1,050 40 Usage by Product B 311 3,090 21 Walnut manufactures 11,100 units of Product A and 7,200 units of Product B per month. Each unit of Product A uses $44 of direct materials and $13 of direct labor, while each unit of Product B uses $74 of direct materials and $28 of direct labor. Required: a. Calculate the activity rate for design. Rate for Design per hour b. Calculate the activity rate for machining. Rate for Machining per hour c. Calculate the activity rate for inspection. Rate for Inspection per batch d. Determine the indirect costs assigned to Product A. Indirect Costs
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